Entrepreneurial Overconfidence: Evidence from a C.A.R.T. Approach
AbstractWe use a sample of 18 countries to study what variables have a significant impact on an individual's decision to start a new business and classification and regression trees for an accurate interpretation of the data. Our results support existing literature suggesting the existence of strong country effects. In addition, we find strong evidence that perceptual variables, such as one's belief about her own skills and ability and about the risk involved in the venture, have a crucial impact on new business creation across all countries in our sample. Our findings are consistent with the idea that entrepreneurs evaluate their businesses by taking an "inside view" of their situation, overestimate their likelihood of success, and, as a result, rely significantly on perceptions rather than on objective expectations of success.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 465.
Length: 26, 3 p.
Date of creation: 2005
Date of revision:
CARTs; Entrepreneurship; Overconfidence; Self-employment;
Find related papers by JEL classification:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
- Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1994.
"Entrepreneurial Decisions and Liquidity Constraints,"
NBER Working Papers
4526, National Bureau of Economic Research, Inc.
- Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1994. "Entrepreneurial Decisions and Liquidity Constraints," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 334-347, Summer.
- Holtz-Eakin, D. & Joulfaian, D. & Rosen, H.S., 1992. "Entrepreneurial Decisions and Liquidity Constraints," Papers 129, Princeton, Department of Economics - Financial Research Center.
- Taylor, Mark P, 1996.
"Earnings, Independence or Unemployment: Why Become Self-Employed?,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 58(2), pages 253-66, May.
- Taylor, Mark P., 1994. "Earnings, independence or unemployment: why become self -employed?," ISER Working Paper Series 26, Institute for Social and Economic Research.
- Blanchflower, D.G. & Oswald, A., 1991.
"What Makes an Entrepreneur?,"
Economics Series Working Papers
99125, University of Oxford, Department of Economics.
- Murat F. Iyigun & Ann L. Owen, 1997.
"Risk, entrepreneurship and human capital accumulation,"
Finance and Economics Discussion Series
1997-37, Board of Governors of the Federal Reserve System (U.S.).
- Iyigun, Murat F & Owen, Ann L, 1998. "Risk, Entrepreneurship, and Human-Capital Accumulation," American Economic Review, American Economic Association, vol. 88(2), pages 454-57, May.
- Cooper, Arnold C. & Woo, Carolyn Y. & Dunkelberg, William C., 1988. "Entrepreneurs' perceived chances for success," Journal of Business Venturing, Elsevier, vol. 3(2), pages 97-108.
- Elke U. Weber & Richard A. Milliman, 1997. "Perceived Risk Attitudes: Relating Risk Perception to Risky Choice," Management Science, INFORMS, vol. 43(2), pages 123-144, February.
- Busenitz, Lowell W. & Barney, Jay B., 1997. "Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision-making," Journal of Business Venturing, Elsevier, vol. 12(1), pages 9-30, January.
- Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-59, November.
- Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
- Holtz-Eakin, Douglas & Joulfaian, David & Rosen, Harvey S, 1994.
"Sticking It Out: Entrepreneurial Survival and Liquidity Constraints,"
Journal of Political Economy,
University of Chicago Press, vol. 102(1), pages 53-75, February.
- Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Sticking it Out: Entrepreneurial Survival and Liquidity Constraints," NBER Working Papers 4494, National Bureau of Economic Research, Inc.
- Dan Lovallo & Colin Camerer, 1999. "Overconfidence and Excess Entry: An Experimental Approach," American Economic Review, American Economic Association, vol. 89(1), pages 306-318, March.
- Otani, Kiyoshi, 1996. "A Human Capital Approach to Entrepreneurial Capacity," Economica, London School of Economics and Political Science, vol. 63(250), pages 273-89, May.
- Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E. With contributions by-Name:Dunne,Tim With contributions by-Name:Haltiwanger,John, 1998.
"The Dynamics of Industrial Competition,"
Cambridge University Press, number 9780521633574, December.
- Daniel Kahneman & Dan Lovallo, 1993. "Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking," Management Science, INFORMS, vol. 39(1), pages 17-31, January.
- Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
- Tobias J. Moskowitz & Annette Vissing-Jørgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," American Economic Review, American Economic Association, vol. 92(4), pages 745-778, September.
- Tobias J. Moskowitz & Annette Vissing-Jorgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," NBER Working Papers 8876, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek).
If references are entirely missing, you can add them using this form.